HSIE Institutional Report: Hyundai Motor India

New Plant Costs to Cap Margin Expansion

Hyundai Motor India’s (HMI) EBITDA margin at 11.2% missed our estimate by 126bps and Bloomberg consensus estimate by 152bps, mainly due to adverse gross margins and higher costs related to the new plant. Management has called out for higher costs related to the new plant, like labor, manufacturing overheads and depreciation, to sustain over the next 3-4 quarters. While we are positive on the PV industry over the medium term, led by the GST rate rationalization and exports potential, we remain concerned on the company’s lack of aggression in the Indian market with regards to volumes and market share, where competition is getting more aggressive. We value the company at 25x Dec-27 EPS for a target price of INR 2,282, and maintain a REDUCE rating.

Hyundai Motor India Quarterly performance

Revenue at INR 179.7bn grew 8% YoY and 2.9% QoQ, 1.8% above our estimate and in line with Bloomberg consensus estimate. Realization remained flat QoQ, despite unfavorable product mix, as discounts eased from 3.2% in Q2 to 2.6% in Q3. Gross margin deteriorated 124bps QoQ on the back of a unfavorable product mix, commodity inflation, and plant startup costs.

Call Takeaways

1. Management indicated that based on a discussion within SIAM, broadly 6% YoY growth is expected for domestic passenger vehicles sales for FY27.
2. It highlighted ASP improved 5% YoY on the back of a strong mix and prudent pricing, while ASP was maintained on a QoQ basis despite seasonality and higher competition.
3. Discounts declined from 3.2% on ASP in Q2FY26 to 2.6% in Q3FY26.
4. It indicated that a total impact of about 100bps on account on new plant-related costs is expected to continue for a year, of which an impact of 60-70bps has been borne in Q3FY26.
5. Profitability was impacted on a YoY basis by the increase in processing cost linked with capacity expansion, while on a QoQ basis, it was due to unfavorable mix and marketing expenses.
6. The launch of new taxi-oriented range along with GST rate cut has been helping ‘Aura’ sales volumes.
7. With a shift of all-new Venue to the Pune facility, the Pune plant has already achieved 90% capacity utilization.
8. Management indicated that the channel inventory is low, with inventory being 2-3 weeks as of 31 December 2025, which increased to four weeks by the end of January 2026 (normalized inventory in Jan is usually five weeks).
9. Commodity price inflation continues to put stress on margins, though it is working on mitigating this through long-term supplier sourcing strategy, cost optimization, localization, and value engineering.
10. The rural contribution to sales was more than 24% in Q3FY26, the highest-ever quarterly.
11. It maintained its guidance on 11 14% EBITDA margin to continue for the coming years.
12. As a % of domestic sales volume, CNG is now at 16% and diesel at 21%.

Hyundai Motor India Quarterly/Annual Financial Summary

Source: HSIE Research (HSIE Results Daily – 03 Feb 26 – HSIE-202602030656002630379.pdf)

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